Poor transport infrastructure makes Uganda’s connectivity to AfCFTA markets difficult

by Business Times
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Uganda Manufacturers have revealed that infrastructural bottlenecks is one of the challenges that Uganda in being able to leverage the African Continental Free Trade Area (AfCFTA) market.

According to Mr. Richard Mubiru, a board member of the Uganda Manufacturers Association (UMA), connectivity to various parts of Africa from Africa remains a daunting nightmare.

Mubiru was speaking at a private sector dialogue on harnessing opportunities presented by AFCFTA organized by the Uganda National Chamber of Commerce and Industry (UNCCI), Private Sector Foundation Uganda (PSFU), the Ministry of Trade and Cooperatives, UMA with the support of United Nations Development Programme.

“Such is the status for roads, railway, air and water transport. Consequently, it is cheaper to import a forty feet container from China to Uganda than exporting from Uganda to Nigeria since the cost parameters for exports into Nigeria can at the minimum be double the cost to China,” he explained.

Uganda’s services are exported to East African Community, 32.6% to Other African countries not in EAC, 21.8% to the European Union, 8.6% to the North America/ Caribbean and 6.5% to unidentified regions. Professional, Scientific and Technical activities contributed 30.3% and Transportation and Storage sectors 34.1% were the major sectors involved in the exportation of services.

Muburi further revealed that affordable finance is a major impediment for existing local exporters as well as those interested in joining the trade.

“At least 90% of private sector credit [average 22% per annum] in Uganda is from commercial banks while for Asia, the biggest competitor on exports, 100% [less than 7%] of such export credit is from development finance institutions that result into super competitiveness of imports relative to local production. M/s AFREXIM Bank is trying to bridge the gap. However, it also has structural limitations of not being tailor-made for SMEs who are the majority exporter,” he explained.

He however noted that on infrastructural deficit across board, there is need for Africa to visualize Trans Continental Infrastructure Projects in the areas of Roads, Railway, Power, Water Ways, Border Markets and Air Transport.

“In this respect, Africa should be able to engage multilaterally with potential developers based on Public Private Partnership Models that allow for concessioning of such infrastructure so that projects are self- financing to avert infrastructural development backlog. In this respect, Uganda has already developed a Public Investment Financing Strategy that she is ready to deploy in securing the financing of planned programs for National Development Plan Three worth UGX 411.7 trillion for five years that create a financing gap of UGX 33 trillion that can now be financed through various innovative models inclusive of the suggested one,” he noted.

Mubiru explained that the financing requirements currently under the Afri-Exim Bank act as inhibitors other than enablers of investment in the African region.

“The continent needs a kind of lender who understands the local challenges. The rigidity of paperwork should not be a matter which hampers growth in the continent. This can also be done through partnerships with the resident bankers’ associations and the local commercial banks in order to trickle down accessibility to the SMEs who constitute at least 70% of the private sector in Africa,” he said.

The top ten export destinations for Ugandan goods in their order of importance include; United Arab Emirates (44%), Kenya (11.2%), South Sudan (8.61%), Democratic Republic of Congo (DRC, 6.43%), Italy (3.32%), Tanzania (2.29%), Germany (2.26%), Sudan (2.16%), Netherlands (1.88%) and Belgium (1.74%).

Mr. Stephen Asiimwe, the PSFU Executive Director noted that Uganda’s exports to Africa hit $ 1.77 billion in 2021, increasing by 26 per cent from $1.4billion in 2020, while imports stood at $2.47billion in 2021.

Mr. Stephen Asiimwe, the PSFU Executive Director (PHOTO/Courtesy)

Uganda has great potential to export coffee, milk, sugar, beverages, iron and steel, cooking oils, and cement.

“We’ve been given an opportunity as a continent to trade together, to invest together, to sell to each other. We need to create an export-ready environment, especially for small and medium enterprises, to make the most of this opportunity,” said Mr. Asiimwe.

Currently, intra-African trade accounts for just 12% of total trade as compared to 60% for Europe and North America. Trade among African States is still very low.

The Secretary-General of ACFTA, Wamkele Mene maintains that AfCFTA must be primarily for Africa’s goods, services, and products. “We want to foster industrialization in Africa to create jobs in Africa. Uganda is one country that is very well positioned to benefit from the AfCFTA,” he said.

The Secretary-General of ACFTA, Wamkele Mene (PHOTO/Courtesy)

Mr. Wamkele said the private sector has a critical role to play to feed the continental market.

“It is very important that we engage the private sector. It is not the government that trades; it is the private sector that trades. We must work together to create opportunities for the private sector to engage in intra-African trade.”

Currently, Uganda’s exports of sugar to the continent is valued at $99.8 million and there is an untapped export potential of an additional $53 million of sugar exports to the continent, he said.

During the dialogue, Ms. Elsie Attafuah Resident Representative of UNDP Uganda urged the private sector to take a proactive role by trading under the continental deal.

“Intra-Africa trade has the potential to catapult Africa’s development, especially in an era where development is being defunded in part due to, escalating geopolitical tensions, wavering geoeconomic interests and resultant shifts in trade and foreign direct investment; and potential ramifications for certain decisions that sovereign States in Africa, including Uganda, are taking,” she said.

She noted that the focus should be on key areas of concern including developing focused and complementary specific policies and strategies to attract export-oriented foreign direct investment, investing in connectivity, and high-quality infrastructure that delivers goods and services among others.

“Turning Africa into a real single market — a market where goods, services, and people move freely from Cairo to Cape Town, or from Accra to Kampala — requires us to close the regional infrastructure gaps,” she said, revealing that the Government of Uganda and UNDP are designing a Digital Transformation Road that will among others, boost Uganda’s participation in electronic commerce, facilitate the efficient and secure flow of money across borders and foster investment and the creation of virtual employment markets.

UNCCI President, Mr. Olivia Kigongo said the reduction in trade costs relating to trade facilitation, Non-Tariff Measures (NTMs) and Non-Tariff Barrie’s (NTBs) will help grow trade.

UNCCI President, Mr. Olivia Kigongo (PHOTO/Courtesy)

“Much of Uganda’s exports are concentrated within East Africa’s markets. AfCFTA presents an opportunity for Uganda to expand to new markets. These opportunities bring increased competition and require us to improve our quality of produce,” said Kigongo.

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